P&G Q1 Profit Down 4%, But Results Top Estimates; Cuts FY23 Sales Outlook

Consumer goods giant Procter & Gamble Co. (PG) reported on Wednesday that profit for the first quarter decreased four percent from last year, hurt primarily by higher commodity and input material costs, despite 1 percent net sales growth.

However, both earnings per share and quarterly sales topped analysts’ estimates. Looking ahead, the company maintained its earnings and organic sales growth guidance for full-year 2023, while lowering all-in sales growth outlook.

“We delivered solid results in our first quarter of fiscal 2023 in a very difficult cost and operating environment,” said Jon Moeller, Chairman, President and Chief Executive Officer.

Net earnings attributable to P&G for the quarter declined to $3.94 billion or $1.57 per share from $4.11 billion or $1.61 per share in the prior-year quarter. Currency-neutral core earnings per share were $1.73 per share.

On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $1.54 per share for the quarter. Analysts’ estimates typically exclude special items.

Net sales for the quarter edged up 1 percent to $20.61 billion from $20.34 billion in the same quarter last year. Analysts had a consensus revenue estimate of $20.33 billion for the quarter.

Excluding the net impacts of foreign exchange, acquisitions and divestitures, organic sales also increased 7 percent, driven by a nine percent increase from higher pricing and a one percent increase from positive product mix, partially offset by a three percent decrease in shipment volumes.

Beauty segment sales were flat and Grooming segment sales declined 4 percent, while Health Care segment sales increased 3 percent, Fabric and Home Care segment sales improved 1 percent as well as Baby, Feminine and Family Care segment sales increased 1 percent from last year. Organic sales growth was seen across all segments.

Gross margin as a percentage of sales decreased 160 basis points, driven by 510 basis points of increased commodity and input material costs, 40 basis points of higher freight costs, 30 basis of product/package reinvestments and 130 basis points of negative product mix and other impacts.

These were partially offset by benefits of 470 basis points from increased pricing and 110 basis points from gross productivity savings.

“These results enable us to maintain our guidance ranges for organic sales and EPS growth for the fiscal year despite continued significant headwinds,” added Moeller.

Looking ahead to fiscal 2023, the company continues to project earnings per share growth in the range of 0 to 4 percent from the base fiscal 2022 earnings of $5.81 per share, implying earnings in a range of $5.81 to $5.83 per share. It also still expects organic sales growth of 3 to 5 percent.

The company also now projects annual all-in sales to decline 3 to 1 percent, down from the prior forecast for a growth of 0 to 2 percent.

The Street expects the company to report earnings of $5.88 per share on revenue drop of 0.2 percent to $79.99 billion for the year.

The Company added that its current outlook estimates headwinds of approximately $1.3 billion after-tax from unfavorable foreign exchange, $2.4 billion from higher commodity and materials costs and $200 million from higher freight costs.

The combined impact of commodities, freight and foreign exchange is approximately a $1.57 per share headwind to fiscal year 2023 earnings per share, or a 27 percentage point headwind to earnings per share growth.

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